In Hawaii, an Insurer's Liability Can Extend to Intentional Infliction of Emotional Distress With "Outrageous" Claims Handling
For many individuals who suffer a property loss, the most stressful time is the adjustment period with their own insurance or the insurance of the party that caused the loss. Often, during the adjustment people need money for temporary housing or have lost all their personal possessions and are trying to rebuild their lives or businesses. The Hawaii Supreme Court recognized the rights of a third-party claimant to bring an intentional infliction of emotional distress (IIED) cause of action when an insurer’s outrageous behavior causes harm. This case leaves the door open to a potential IIED cause of action in first party matters.
In Young v. Allstate Insurance Company,1 the 84-year-old female plaintiff suffered injuries when her car was rear-ended by the Allstate insured. Allstate contacted the plaintiff, letting her know it would provide her with quality service and specifically told her that she did not need an attorney. Additionally, Allstate provided the plaintiff with a "Quality Service Pledge" that assured her "You’re in Good Hands with Allstate."
Allstate did not live up to the bargain and offered less than her actual damages. The plaintiff filed suit, and Allstate countersued claiming the plaintiff was negligent even though Allstate’s insured had fallen asleep at the wheel, causing the accident. The matter went to trial, and a jury awarded the plaintiff $200k. She then filed a lawsuit for bad faith and IIED against Allstate. The trial court dismissed the bad faith claim because there was no contractual relationship with the insurer and dismissed the IIED claim because the insurer’s action was not outrageous.
The matter went to the Hawaii Supreme Court, which affirmed dismissal of the bad faith claim and reversed dismissal of the IIED claim. An allegation of IIED in Hawaii requires the following: (1) the conduct allegedly causing the harm was intentional or reckless, (2) the conduct was outrageous, and (3) the conduct caused extreme emotional distress to another. The Supreme Court held average members of the community could find the insurer’s actions "outrageous."
Young establishes that third-party claimants may seek damages for IIED against insurers in Hawaii. When Hawaii insurers adjust claims, they should consider how their actions directly affect third parties recovering under the insurance of another.
1 Young v. Allstate Ins. Co., 198 P. 3d 666, 119 Haw. 403 (Haw. 2008).
Last week - Tuesday November 13, 2102 I met with two insurance loss claim adjusters from "Team One Adjusting Services LLC", on a project in Dallas, Texas.
According to their business cards one adjuster is a "Field Unit Leader", and the assistant's title was "Adjuster".
The meeting, on my client's property, due to the June 13th 2012 wind/hail storm, was (eventually) necessary because the first "adjuster" saw ZERO storm damage.
A second inspection was requested, and the second adjuster saw the damage, and used quite a bit of fuzzy logic to dismiss the obvious.
The THIRD inspection was requested and so a "Field Unit Leader" and an assistant adjuster were assigned, and scheduled to meet. Long story short - The storm damaged Roofing System, Rain Guttering System, Paintwork, AC unit, Window Screens/Frames, and Metal Privacy Fence were thoroughly assessed by them, and are to be paid for.
However...As we all wrapped things up, by standing in the carport summarizing damage details, the "Leader" made an OUTRAGEOUS comment to myself, and three witnesses. He said;
'Just to let you know...SAFECO pays General Contractor Overhead and Profit costs towards everything but the Roofing System'.
Now mind you I do perform volunteer work on occasion, but in order to run the business and feed my family I could NOT agree that I should take on the riskiest part of the reconstruction project and then not make (10%) profit on it, or apply base (10%) overhead costs.
The experience was very "emotionally distressing". (Ok, not really, because I see carriers try to (swindle?) Clients and Contractors out of basic replacement cost factors ALL of the time in Texas).
Anyway, I was told yesterday (11/19/2012) that their "estimate" was being presented to Safeco. Hopefully the "Adjuster (Xactimate generated) Summary" displays the illicit lack of GC O&P replacement costs towards the Roofing System. Then the paperwork will clearly show the non-G.C. O&P loss value calculation scheme...yet again.
On an even more serious note - The "Field Unit Leader" clearly stated, (as he was trying to add awkward weight to his faulty construction replacement cost methodology logic), that 'Safeco / Team One has already estimated 600 (Six Hundred) Storm Sandy claims this way'.
So...East coast Storm Sandy victims; Be prepared for the following carrier/adjuster conduct that Hurricane Isabel in 2003 exposed - Yet again...
1) Adjusters may not accurately assess all storm damage.
2) Adjusters can willfully deny obvious covered damage.
3) Adjusters can eventually admit obvious covered damage.
4) Adjusters Managers will irrationally deny policy holders critical GC O&P replacement cost entitlements.
5) Adjusters Managers will get loud and sensationally forceful when caught using twisted logic to avoid estimated GC O&P costs to Roofing Systems repair and/or replacement costs.
It is amazing how, despite the fact that Insurers and Adjusters in Texas, and elsewhere, fully know and understand that anticipated replacement costs of a structure naturally include Materials, Labor, Sales Tax, Various Overhead and Profit costs, that they STILL continue to intentionally "steal" from consumers the GC O&P values carriers have charged consumers for, in premium dollars.
False indemnification construction estimating math can win Carriers "Illegal Windfall"* in a stealth-like accounting manner, and also win Adjusters more work from certain Insurance Companies. But, it also sets in motion more emotional and financial trauma for their own insured clients, and creates and perpetuates ongoing distrust of Insurers and Adjusters by construction business owners, regulatory agencies, attorneys, news reporters, and others.
IF Insurance Companies would stop undermining consumers - (their neighbors) - confidence in business and people - then one major hurdle would be gone towards the complex rebuilding efforts needed after catastrophes. Efforts would be able to flow in a less traumatic manner, and all that that means.
However, since the love of 'Illegal Windfall (Profits)'*, and the processes required to make them happen, apparently surpasses the love of their fellow man, then Insurers will continue to harm others, unchecked, and all that that means.
How unnecessarily sad and outrageous is that.
*Texas Department of Bulletins B-0045-98 & B-0068-08